The Regional Housing Needs Allocation (RHNA) Process Explained

Every 8 years the state gives each regional planning agency a housing planning target for the number of units needed and affordable at various income levels. Then the regional planning agencies develop a process to allocate the regional total to local jurisdictions.

There is a new methodology being used for the next round of regional housing allocations that will lead to much higher regional targets than in the last cycle. The new methodology is explained below after some background.

These allocations require planning for units to be developed and are not a requirement to build the units. At the local level the planning can be found in each jurisdiction’s adopted Housing Element and the city’s policies to attract housing at all income levels. The actual construction of units requires an application from a private or non-profit developer that is approved by the local jurisdiction.

I have been involved professionally in the regional allocation process for several regional planning agencies but have never been involved in the local allocation process. So this blog is about the regional allocation, not the allocation to local jurisdictions.

The regional allocation for the Bay Area will be determined in an iterative process involving the regional planning agency (now MTC), the state Department of Housing and Community Development (HCD) and the state Department of Finance (DOF). The ultimate authority rests with HCD but they and DOF want to be respectful of and try and reach agreement with the regional agency, which has the responsibility for doing growth forecasts and related regional policy development.

The new Bay Area regional allocation is probably a year away and will cover the period from 2023 through 2030. Preliminary discussions of methodology have begun between HCD, DOF, and MTC. A regional allocation has been completed for the San Diego region and is underway for the Southern California region and they give insight into what is a new HCD process.

The prior RHNA regional methodology focused on planning for housing to meet the needs resulting from regional job and population growth. The new methodology, driven in part by new laws and in part by new state policy, includes housing targets to “catch up” with housing shortfalls developed over the past decade and is oriented to helping existing residents.

The basic methodology has parts that continue and new parts. One building block is a set of projections of population by age and ethnic group. An initial set is developed by DOF and DOF and MTC will discuss these projections based on the MTC regional growth forecast.

A second building block is a set of household formation rates (household forming behavior) by age and ethnic group developed by DOF. These address behaviors such as will the current trend of young adults living with their parents continue, will we continue to see as many residents doubling up to9 save on rent, and will multi-generational living for Hispanic and Asian families continue at current levels. A third and fourth building block is an estimate of the need for units to replace units that are demolished and a requirement that the region have enough units to maintain a reasonable vacancy rate.

These are all current building blocks that will continue.

State law now requires HCD to include the number of units needed to address current overcrowding and the number of units needed so the region does not have an above average share of cost-burdened households. These new requirements are evaluated by comparing the region’s current performance relative to that in comparable regions. So how does the % of overcrowding and cost-burdened households compare to comparable regions.

The household formation rates are also being developed with a thought to “catch up” by returning to household forming behavior of a more normal time (not the highest in recent history but not the current historically low levels. For example, they will not lock in current behavior of young adults living with their parents to last to 2030 or a situation where four or five housemates need to share the rent.

The new regional allocation has been adopted in San Diego and it is significantly higher than the RHNA target for 2015-2022. The regional allocation proposed by HCD in Southern California (not adopted yet) is also significantly higher than the current RHNA target.

It is reasonable to expect the same result in the Bay Area as we not only have seen rapid growth since 2013 when the last RHNA was adopted but a high share of cost-burdened households and households that have doubled or tripled (or more) up to economize on costs.